Cannabis and Cryptocurrency
My first post here in Bulb is about Cannabis and Cryptocurrency, it's about a particular cryptocurrency that is based on cannabis and i invested since the early part of 2023. This time i'm delving into the fusion of cannabis and cryptocurrency. How it came about, what is it's future and will it ever fly? Ever since Blockchain and cryptocurrency became popular every sector of business and industry wants to be part or want to use blockchain and cryptocurrency to whatever they think it will be useful for their sector and business. Cannabis is one of that sector that want's to get into the game for the simple reason that financing the cannabis industry is almost impossible to get no banks will give a loan to any cannabis businessman since it's Schedule 1 Drug meaning it's illegal even though a lot of states have legalized it banks is covered both by state laws and federal laws. So cannabis businessman is resorting to alternative way to finance their business and one of this is cryptocurrency. A report from Bloomberg in 2022 stated the same reason on their report saying "Token offerings could broaden the funding sources available to the pot industry, which can’t borrow money from banks due to the U.S. federal government’s prohibition on marijuana. Funding so far has mostly come from venture capital, wealthy individuals and individual shareholders, rather than institutional investors." Even if the US Congress pass the SAFE Banking Act to enable banks and financial institutions to extend loan and finance a cannabis business would still be subjected to heightened scrutiny and exhaustive “suspicious activity reporting” requirements by the banks under the same federal AML laws. Accepting these deposits would thus significantly increase a bank’s cost of compliance with federal regulations, costs which would be passed on to account holders through significantly increased fees; which ultimately translate to passing the cost to the end users.
That's not the only thing going against cannabis business owners and end users, since cannabis is a Schedule 1 Drug it will fall under the Section 280E tax requirements of the IRS meaning cannabis companies pay around a 70% tax rate, compared with the average corporate tax rate of 20% and this 70% tax rate will really eat into their profit and as any normal businessman will do they will pass that 70% down to the end users.
Why Cannabis needs Cryptocurrency
With the banking insider totally shutting out cannabis this only leaves Cryptocurrency payments the only a viable and necessary public policy alternative to the all-cash status quo and financing solution left for the cannabis industry, they offer a superior alternative to the federally regulated banking system and traditional payment rails even after the Senate acts to provide cannabis businesses with access under the SAFE Banking Act. Cryptocurrencies hold incredible promise, and not only for providing access to financial services through decentralized finance (DeFi). They have the ability to level the playing field between large, well-capitalized multistate operators (MSOs) on the one hand, and small businesses (including woman- and minority-owned enterprises, and social equity licensees) on the other.
Crypto may not be the “answer” to all of the problems inherent in the cannabis industry. the possible implementation of blockchain technology. could be a good match because blockchain technology provides a good traceability factor for funds derived from cannabis plants, Blockchain technology can help cannabis companies have compliant supply chains by proving provenance and tracking ownership. This is i think the most positive area where cannabis and blockchain is a match made in heaven, tracking and provenance is a sure way the regulators can say that the money derived from cannabis did not come from illegal sources and money laundering can easily be traced. At the end of the day taking out cannabis from Schedule 1 restriction is the only way for cannabis to really be successful business-wise.
Source
https://www.bloomberg.com/news/newsletters/2022-04-18/marijuana-investor-turns-to-crypto-tokens-to-accelerate-funding
https://www.coindesk.com/layer2/2022/04/27/crypto-cannabis-and-safe-banking/
https://www.coindesk.com/layer2/2021/12/15/why-the-marijuana-industry-needs-crypto/
https://www.youtube.com/watch?v=IzLW-kYjWwo
https://www.coindesk.com/layer2/2022/08/31/can-crypto-save-the-cannabis-industry/
